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Screenshot of a breaking news alert e-mail from Q2 2017
Barclays PLC (LON:BARC) is the latest major bank to soften its stance on the dollar. Yesterday, the bank notified clients it was forced to close out its rolling recommendation to buy the dollar versus the euro after the past month’s improvement for the single currency (see chart below).
The euro has paused it’s steep decline back in March, and since reversed it’s descent towards parity to claw back over the 1.10 handle. Taking the long view however, the bank remains bearish…
The strategy team of the Forex market’s third biggest FX bank said it had closed its position, originally taken when the euro was around $1.28, with a 14.8% profit since last August. Barclay’s moving “stop-loss” order to now sell the dollar versus euro and protect gains achieved was triggered by the euro’s move above key resistance of $1.09 on Monday.
In a research note to clients Tuesday the bank stated: “We remain bearish on the euro. We believe that the euro has much further to go in its trend depreciation, albeit at a slower pace and with two-way risks attached … but the recommendation was a casualty of the slowing trend.”
Protecting gains amidst new fine allocation?
Barclay’s looks to protect it’s in house trade as we learned today it has officially set aside a tranche of funds for the FX rate manipulation fines it was alleged of. The AP reported today that Barclays set aside an additional £800m ($1.2 billion) to cover the cost of allegations that it manipulated foreign exchange markets as the mega UK bank seeks to put the scandals of the past behind it. The bank’s total provision for fine costs now amounts up to £2.0 billion ($3.1 billion).
Back in December, the bank had a strong idea that it’s initial £500m ($779m) allocated for forex settlements with regulators would not be enough, we now know the figure goes beyond the $1b mark.
CEO Antony Jenkins stated today to sources, “Resolving legacy conduct issues is also an important part of our plan to transform Barclays.” He had admitted last year the bank could beef up it’s compliance and operations department.
The forex manipulation scandal revolving around the 4pm fixed benchmark rates look to be settled this year. Last year, as covered by LeapRate, regulators chased around and investigated the most prominent global banks in their investigations of the FX rate manipulation scandal. You can view below a chart courtesy of UK’s Telegraph of current and projected fines of the top banks involved. As noted, Barclay’s has yet to pay out anything of it’s alleged charge, although settlement it looks like is imminent.